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As companies rethink employee value propositions (EVPs) and the total rewards mix in today’s health care reform world, VBS will likely play

an even greater role in companies

of all sizes and industries.

Approximately 21% view voluntary benefi ts as important for 2013, but their enthusiasm more than

doubles to 48% for 2018.

Most employers plan to take advantage of VBS to enrich existing core benefi t plans (83%) and augment the total rewards package (74%). With the excise

tax on high-cost core health care plans launching in 2018, they need to control increasing health care costs. VBS offers some opportunities.2013

21%

2018

48%

83%

74%

VBS gaining importance over the next fi ve years

Designing the VBS product suite

Health care reform excise tax challenges

Primary reasons companies adopt VBS

For employees, the VBS model offers choice, convenience and affordability. They can access an array of options to personalize their benefi t package to fi t their lifestyles. They can select voluntary products at open enrollment or, in some cases, throughout the year and fund them through payroll deductions. And in many cases, employees pay less when purchasing products in a group-offered model.

In designing plans that fi t the needs of employees, employers focus on employee demographics (54%) and how products fi t within their total rewards (50%) and wellness strategies (44%).

VBS can be attractive to employers seeking to balance plan affordability for employees with looming excise tax

challenges on high-cost plans. Supplemental medical voluntary benefi ts offset the reduction in core benefi t value by

reducing employee out-of-pocket risk. In particular, industries that traditionally offer robust medical plans and experience

higher health care expenses, such as the Energy and Utilities sector, need to be most aggressive in reining

in costs before the excise tax effective date, January 1, 2018.

Employers report that their current VBS offerings are geared slightly more toward older employees. Today, baby boomers represent a large population in the workforce, so meeting their needs is important. However, companies reliant on younger employees should evaluate new VBS models to fi t the needs of the Generation X and Y populations as well — by nature, both embrace customized programs.

The 6 most prevalent VBS offerings

include 3 traditional supplemental medical insurance

options (vision, dental and accident), 1 traditional wealth (disability), 1 traditional security (life insurance) and 1 personal (discounts/perks). The top emerging VBS offerings under consideration include one wealth option (fi nancial counseling), one supplemental medical option (critical illness) and one security option (identity-theft protection).

Born between 1946 and 1964

Baby Boomers

Born between 1965 and 1980

Generation X

Born between 1981 and 1999

Generation Y

Born before 1945

Traditionalists

34%

29%

40%44%

VBS can be introduced as a lower-cost alternative in a high-cost plan, if implemented appropriately.

VBS are more geared

toward baby boomers

today (as noted right),

but personalized benefi t

designs appeal to younger

generations.

VBSMore employers will turn their attention to Voluntary Benefi ts and Services (VBS) over the next fi ve years. VBS meet employee needs by addressing concerns across four critical life needs: supplemental health, wealth accumulation, security and unique personal interests or requirements. Supplemental health benefi ts foster employee and dependent well-being while mitigating risk at a reasonable cost. Wealth products protect income and assets; security products protect survivors,

the vulnerable or one’s identity. The fi nal category covering personal products provides convenient access to desired insurance coverages and other services that the employee perceives as personally important.

In the spring of 2013, Towers Watson surveyed more than 300 U.S. employers to determine how they use and deliver voluntary programs now and over the next fi ve years.

54%

50%

Employee Demographics

44%Wellness

Strategies

TotalRewards

Trends in Voluntary Benefi ts and Services